French firm Danone says it will also cut the price of its formula in China, but is yet to release any details.

Sales of foreign brands have soared in China, which is the world's largest market for baby formula, after tainted milk scandals damaged their Chinese competitors.

The most serious scandal killed six children and made hundreds of thousands sick in 2008 when melamine was added to baby formula.

Baby formula quality remains the leading food safety issue in China since the melamine-tainted milk scandal.

Many consumers are wary of local brands and pay the higher prices for foreign products.

The demand for foreign-made baby formula in China has been so high it has led to smuggling, shortages in Australia and Hong Kong, and a surge to a 50 per cent market share for foreign companies.

David Mahon, managing director of Mahon China Investment Management in Beijing, has told Radio Australia's Asia Pacific program foreign companies are trying to ensure those prices are maintained throughout the distribution chain.

"There's quite a lot of 'management' of price in China," he said.

"All companies selling infant formula are doing the same thing."

Mr Mahon says most consumer complaints about formula pricing have been against local brands, but the investigation doesn't extend to them.

"It's been applied certainly unjustly, because it's only being applied at this stage to to foreign firms," he said.

He says some local companies add a premium for ingredients said to be sourced from overseas.

But a check by Mr Mahon's company of 100 local products claiming to have New Zealand ingredients has revealed those claims were false in all cases, despite impressive packaging.